Effective communication of improved performance and significant changes in its functioning bolstered LIC’s performance in the Stock Market, DIPAM (Department of Investment and Public Asset Management) Secretary Tuhin Kanta Pandey has said. In an interview to businessline, Pandey said the government is not insisting on maximum dividend from CPSEs (Central Public Sector Enterprises), rather it is focusing on value creation.
“We requested LIC and accordingly, they have constantly engaged with the investor community and taken their feedback. They are communicating with the investors about the challenges they have and the solutions they are finding, both in terms of retention of the profitable market share. They are looking at different products and sharing success stories. It is the beginning of a big transformational journey for LIC,” Pandey said when asked about the rise in share prices of the insurance behemoth.
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After its initial public offer, the public sector life insurance companies got listed on May 17, 2022. In the IPO, LIC allotted shares to retail investors and employees at ₹904. For high-net-worth individuals and institutions, the price was ₹949. Soon after listing, the price slipped below the issue price and then it hit the all-time high low price of ₹530 in March 2023. However, since the beginning of this year, the share has been on the rise and has crossed the magic four-digit figure. It closed at ₹1080.85 on February 9 and now it has become the largest public sector entity with over ₹6 lakh crore market capitalisation.
Pandey expressed satisfaction with LIC following the government’s advice post listing. This included advice about balancing of product portfolio where they have been consistently adding non-par products which has a positive impact on profitability. It may be noted that non-par or non-participating plans do not provide any dividend benefits or payouts.
The Secretary said the insurance company has also launched a digital transformation project for which BCG has been hired. ”It is a very comprehensive project and will have several phases. But I believe they would take on upfront certain things regarding their app and others where they need to have a much better experience for their potential clients. The policyholders to work out and get into the LIC family,” he said.
Another fundamental change that has happened in the old management is in terms of viewing the policyholders and shareholders together. “When you start creating value, it will actually be beneficial both for policy holders as well as for shareholders. Because eventually, the money which is being invested on behalf of the policyholders has to be looked at in a manner where they (shareholders) get better returns,” he said.
Talking about other listed PSUs, (61 CPSEs and 16 Public Sector Banks and Insurance Companies) Pandey said that the focus is more on value creation rather than just divesting on any value or getting higher dividends. “We have not insisted that the government should receive the maximum dividend. We are only saying that there should be a consistent dividend policy and there will be use of resources and wherever we have the capex needs, the equity needs of the capex should be fully met with a reasonable debt, which is consistent with the principles of efficiency and effectiveness,” he said.